Infonomics

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When Does Complex Event Processing (CEP) Complement a BRMS?

I have just published this blogpost on ILOG's BRMS Blog as guest blogger and I look forward to continuing to explore the opportunities in BRMS and CEP. To digg this post, simply go here.

As interest grows in CEP, we have started receiving inquiries about how CEP and BRMS compete with or complement each other. After discussing with customers, prospects, and vendors, and reviewing a wide range of use cases, a few patterns have emerged.

CEP shines when:

• event data rates are very high, typically in the 100,000s events per second, and with multiple event streams;
• latency is low, typically in the millisecond range;
• flat data model, simple data type;
• a few stable rules/ statements/ queries (a few dozens at most) are deployed for filtering, joins or aggregate computation.

These core capabilities are well documented. For additional details, Mark Tsimelzon’s CEP Complexity Scorecard summarizes them very effectively.

On the other hand, a BRMS addresses three critical needs:

1. rich rulesets, typically ranging from a few dozens to tens of thousands of business rules;
2. a complete lifecycle management environment for business rules, empowering technical and business users to author, manage, simulate and retire business rules;
3. extreme agility with the ability to update business rules in as little as a few minutes.

ILOG BRMS does not compromise on performance either, as have shown benchmarks and actual deployments with demanding customers, such as some of the largest websites, payment networks, underwriters, and telecom operators.

The map above sums it up: a CEP engine complements a BRMS for use cases with large data rates, low latency, and rich decision automation and management. The CEP engine pairs down the volume of events and only passes interesting events on to the BRMS to perform a rich decision process. Examples abound, notably in fraud management and national security.

Conversely, CEP overlaps with BRMS at the low end of data rates, latency requirements and rulesets. This is the area where we’ve seen some confusing accounts and claims and where a CEP engine provides limited value on top of a BRMS.

In upcoming posts, we will continue to explore and discuss best practices surrounding BRMS and CEP. We encourage you to reach out to us with related experience and questions.

Wikinvest Launches. Heads for Challenges

Wikinvest has just raised $2.5M from DCM and officially launched – although it’s been in open beta for a few months now. In terms of features, on the plus side, the shared stock chart is a sleek feature and a visual way to share facts and opinions about stock trends. As far as I can tell, this is a nice differentiator. On the minus side, the reputation system is interesting from an editorial standpoint, but fails to enable readers to rate or track a contributor’s opinion (neutral, bullish or bearish) in light of its past recommendations and successes. Hopefully, they will fix this weakness, because it significantly reduces the value that contributors would gain through their work on the wiki.

 

In terms of funding, $2.5M seems quite a bit of money, considering that Wikinvest currently lacks technology assets or a user base. As far as content, Wikinvest counts 100,000 contributions. Wired hints that Wikinvest bootstrapped the content with paid contributors. With only 250 contributors, so far, we’ll track their growth. There are only so many free quality contributors for stock analysis. A case in point is the declining state of investor forums. Moreover, the long tail of investing is overcrowded, but Wikinvest might be able to offer a transition path to some investment newsletters, if they add a monetization path to the site. After all, giving away paid content for free - albeit in a pleasant format - is hardly a business model.

Social Investing Crosses the Pond

Social investing has now crossed the pond. Les Echos – a leading French business publication – has just published an overview of social investing tools. The article entitled Investir 2.0: l’accès aux marches financiers se démocratise (Investing 2.0: access to financial market is opening up) features Cake Financials, Covestor, TradeKing, Vestopia, and Zecco, even though none of these services are currently available in France. I wonder how much time it will take before localized versions of these services start to appear. Boursorama, which has been very innovative and successful at blending brokerage services with an online financial portal is probably already working on an upgrade of its forums.

Payment Revolution Will Have to Wait

Steve Case is putting the brand and financial weight of its Revolution investment arm behind a consumer Internet payment offering. The highlights are a PIN-based payment card for consumer, a lower interchange fee for Internet merchants, and a proprietary Internet-based network to authorize and carry transactions.

 

Merchants will undoubtedly find the lower interchange fees attractive. Hopefully, this will spur merchant adoption to rapidly take off. The Internet-based payment network seems to enable Revolution to leverage some slightly more advanced security features than the current credit card standard. However, the low fees will also leave less room for error on risk management.

 

User adoption will be the key challenge. Will security features and peer-to-peer payment be enough to overcome traditional behaviors? Consumers traditionally don’t react strongly to security pitches, because chargeback is perceived as easy for card non-present transactions and because consumers are concerned about security only after disaster strikes. A case in point is the fade into insignificance of the Amex Blue Card v1, which came with a chip and smart card reader.  

 

As for peer-to-peer payment, PayPal succeeded because it piggybacked on eBay’s auctions (and tapped into eBay’s coffins to fine-tune its risk management). Rather than going for generic P2P payments, some focus on one of the underserved P2P payment would more surely bootstrap Revolution’s viral adoption, such as mobile payment, international transfers, advanced consumer payments or P2P lending.

Social Investing and Market Psychology

Some of this summer’s events provide interesting hints about the potential pitfalls of social investing. Market neutral hedge funds (e.g. Goldman Sachs Global Alpha fund was down 23% for the month of August) went down in flames when they tripped upon themselves trying to unwind highly levered bets in illiquid markets that had turned sour. Absolute Capital has lost 90% of its value over the last month, while its portfolio of penny stocks has become worthless.  

 

Social investing sites, such as Cake Financial and Covestor, offer a distinct advantage over other investment forums and blogs, by enabling users to build their reputation based on their actual performance. This capability, although it represents a real improvement, should be taken with a grain of salt. Absolute Capital, for instance, has demonstrated superior performance year after year, as evidenced by its multiple awards.

 

Obviously, when the market trends upward, an asset’s illiquidity provides an added performance boost. Investors that focus too much on past performance and mirror others’ trades - as enabled by social investing sites - could end up reinforcing unhealthy trend, unbeknownst to them. However, when the market turns south, their losses could pile up very rapidly.

Social Investing Ain’t a Piece of Cake

The Techcrunch 40 conference added a bit of enthusiasm to the social finance space this week by selecting Mint as the startup competition winner. Mint consolidates users’ personal finance information across financial services (credit cards, banks, etc.), aggregates financial services offerings, and presents/ contextualizes them. Cake Financial – a social investing site – was also distinguished as a leading contender, in the crowd sourcing space. These results help validate the social financial services space at large, but did not alleviate some of the obstacles ahead.

 

Security is a key concern. The numerous comments in Techcrunch’s announcement post illustrate that point. Another case in point is the security breach at TD Ameritrade, which was apparently ignored for over a year. How could startups succeed when established players fail, in an area where hands on experience and deep pockets matter most?

 

Back in the last boom, Yodlee faced similar criticism and the outcry from experts on security (and financial institutions) was equally loud. Yodlee eventually pulled it off and now serves millions of users (although mostly through contracts with financial institutions). Flawless execution on the security front certainly was critical. However, user adoption ultimately proved that users favored convenience over privacy and security concerns.

 

Above all, an attractive value proposition will determine these services’ longer term viability. Cake Financial, for instance, touts the wisdom of crowds as a smarter approach to investing. This proposition runs counter to the accepted notion of alpha – a.k.a. retail investors’ role in the market is to absorb risk. Focusing on the core social elements of investing, rather than promoting herd mentality, would provide a much stronger foundation for their services.

 

Money:Tech and the Holy Quest for New Alpha Sources

O’Reilly announced a new addition to its conference roll with Money:Tech, which will take place in New York in February 2008. This event brings some excitement back to a market that’s been out of favor with Silicon Valley’s cognoscenti since the burst of the Internet bubble and the e-brokerage consolidation.

 

The theme Finding Alpha in a World of Commodity Data takes on an interesting spin in the current market context, where asset-backed securities – initially designed to commoditize risk and marketed with the blessing of agency rating – turned into an unfathomable risk factor, because of their opacity. Nevertheless, this is an exciting theme, and most likely a great opportunity to benchmark/ showcase services, such as deep search, blog analytics, and other esoteric weak signal technologies.

 

New sources of data (and an improved ability to process it) will provide a more real time grasp at developing trends at both macro and company levels, thereby providing opportunities for timing the market. However, this ever deeper reach into multiple sources of data will push the limits of the mosaic theory and might well collide with the expansive definition of insider trading under US law and blurrier line between public and non-public corporate information.

Other relevant links on Money:Tech:

- O’Reilly’s post

- Kedrosky’s post

- AllthingsD’s post

Google Finance Tiptoes into Social Investing

Google Finance has just released new features for its financial portal.  Overall, the redesign significantly improves the homepage and delivers a lot more information in a much smoother way.

 

I found the “Popularity” feature in the top movers section very interesting.   This feature uses Google Trends to rank stocks/companies based on rising Google query volumes.  Given Google’s breadth and reach, the popularity feature could become an interesting indicator of securities’ mindshare with investors.  

 

For now, however, the feature lacks a few aspects to become a trustworthy indicator, such as the total volume of search or the relative volume of query related to one company. Google could also add those details to the companies’ profile pages – and even chart them – for added visibility.  

Monetizing User-Generated Content

User-Generated Content (UGC) has tremendously grown in terms of volume and awareness over the last couple of years (way beyond the tipping point). 50% of American adults have now been on a blog. On the other hand, monetizing it is still very early stage: $50M of ad spending in 2006, expected to grow to $750M by 2011.

A few trends I gathered at the Media Summit hint at how UGC will be monetized in the long run:

- The "Vert Ramp" still rules creative content, despite the hype about Youtube; the consensus at the conference, echoed by moguls like Barry Diller (or Marc Cuban in his blog), is that creative original UGC is large in quantity but somewhat short on talent: the few ones that turn into actual success online (e.g. lonelygirl15) will get sucked into the media machine that will provide them with mass production means; moreover, advertisers are still reluctant to spend much on a media which content is dubbed “risky” and “uncontrollable”.  

- UGC works well in a social network type of environment, because the social bond is the context that makes the content really interesting to the audience. This is the sweet spot for Flickr, Photobucket, et al.; the emphasis here to further grow this segment should be on privacy controls and ease of use; from an advertising standpoint, the ability to abstract user profiles and match them in real time with ads is still missing; for now, MySpace captures over 60% of all ad money going to social networks;

- Comments and reviews are the most compelling kind of UGC from a media and ad revenue standpoint. Those not only add free content to professionally edited content, but also intimacy, relevance, and stickiness. This UGC category represents a significant advertising opportunity for traditional media and websites that remains to be fully converted.